Senegal, Gambia and Guinea Bissau join vast new oil economies

Feb 23, 2004 01:00 AM

by Kofi Akosah-Sarpong

As the West African sub-region oil and gas potential opens up due to advanced technology, three West African
countries-Senegal, Gambia and Guinea Bissau are joining regional states in the vast new oil economies currently
brewing in the Gulf of Guinea. Republic of Congo's President Denis Sassou-Nguesso expressed high hopes about the
increasing discovery of vast new oil reserves off the Gulf of Guinea and its implications to bring prosperity to the
whole of West Africa when he said, "Our nation is working hard to attract joint investments by oil firms as part of
our overall plan for development."
Until recently Africa's three countries, Nigeria, Gabon and Angola, were tapping Africa's wealth.
"Now the whole region from the Bight of Biafra in Nigeria to the Cabinda enclave in Angola is being viewed as a vast
pool of oil," a United States official has said, as his country shift its energy focus to the Gulf of Guinea oil
boom.

Senegal
After 50 years of preparation, Senegal is now ready to become the next African oil and gas success story. For long
lesser known, Senegal is one African state emerging to become the next significant oil producer, joining the fast
emerging Gulf of Guinea oil and gas boom. Senegal has demonstrated it possesses many of the critical elements
necessary for large-scale oil production. World-class source rocks exist and are mature and generative. Multiple play
types exist, but many exploration wells were either drilled in lower potential plays or poorly sealed
reservoirs.
Recent work is focusing current exploration on higher potential play types in an effort to find significant reserve
volumes believed to be present.

Petroleum exploration in Senegal began 50 years ago in 1952 with a surface geology survey resulting in the first
exploration well being drilled in 1953. Since that time, nearly 150 wells have been drilled in the search for
economic hydrocarbons. During the 1950s petroleum prospecting started and in the 1960s and 1970s a number of small
fields were discovered. However, most of these were designated uneconomical at the time and not exploited. In the
late 1970s, offshore exploration started again and a field of heavy crude oil of 1 bn barrels was discovered. Most
wells failed, but there have been some small successes along the way.

According to J. Dombrowski, exploration manager of Fortesa International, a Texas-based oil company involved in the
Senegalese exploration, "Discovery of 600-1,000 mm barrels of biodegraded oil in the Casamance salt basin of southern
Senegal attests to a prolific petroleum system in the offshore environment. Sustained oil and gas production from the
onshore Diam Niadio field and its satellites produced over 7 bn cf between 1986-1999. A discovery on trend with Diam
Niadio in a new, but older reservoir, is about to go online and re-establish Senegal as a producing country."
Of particular interest are the results of basin modelling conducted in select offshore and onshore areas. Capable of
generating significant volumes of oil, it appears, are both offshore and onshore areas, with the upstream oil
industry becoming increasingly important to the Senegalese economy. "Localized "hot spots" may be more gas prone.

Four Play Trends have been identified, evaluated and ranked. A re-examination of past wells and the plays they were
drilled in has led to new insight as to which plays are most effective for trapping large volumes of hydrocarbons.
This re-examination showed many wells (greater than 80 %) were drilled in the "leaky" part of the Near Shore/Deltaic
Play Trend.
“The best reservoirs are in the Slope Fan Play Trend," Dombrowski said, adding, "Future exploration should and
will target deep-water Slope Fan Play opportunities. Another high potential play being developed is the Carbonate
Bank/Reef Play Trend. This play trend is present all along the NW margin of Africa, and is often discussed as an
exploration target. There have been very few tests of this play. Senegal is optimally positioned to test this play
since it is the only local along the entire margin where the play trend comes onshore and could be drilled with
relative low cost."

In 1981, Societe des Petroles du Senegal (Petrosen), the national oil company, was created by the government and is
responsible for all hydrocarbon exploration activities. So far only one gas field-Diam Niadio 14-has been discovered.
The gas is exported by pipeline to the Societe Nationale d'Electricite for its gas power stations. Current gas
reserves are estimated to be 3 bn cm.
According to the United States Department of Energy, Senegal produced and consumed 1.4 bn barrels of dry gas.
Exploration is continuing offshore and onshore. The major exploration companies involved in Senegal include Vanco
Energy, Roc Oil Company, Fusion Oil and Gas and Benton Oil and Gas.

Onshore Tullow Oil holds the Sebikhotane permit on the Dakar Peninsula in association with Petrosen and Saim. Tullow
have subsequently withdrawn its interest in the Block. In 1960, the French-firm TotalFinaElf discovered the Dome
Flore and Gea fields, which contains estimated reserves of 700 mm barrels of heavy crude, in waters offshore southern
Senegal. The field lies in waters originally claimed by Senegal and Guinea-Bissau.
An independent tribunal ruled in 1985 that the borders established by the colonial powers (France and Portugal) were
still valid. Guinea-Bissau rejected the decision, and the country lodged an appeal with the International Court of
Justice. In 1991, the ICJ upheld the Franco-Portuguese agreement that had established the then colonies' maritime
boundaries.

Guinea-Bissau accepted the ruling, and in 1995 Senegal and Guinea-Bissau established the Agence de Gestion et de
Cooperation (AGC) for the joint-development of oil and exploration and fishing in the disputed area.
In accordance with the ICJ decision, the countries will split any proceeds earned from oil in the area, with Senegal
receiving 85 % of the profits and Guinea-Bissau 15 %. If new oil reserves are later discovered the agreement would be
revised accordingly. In May 1998, United States' Benton Oil and Gas signed an oil exploration/production agreement
with the AGC to drill on the Dome Flore field. The AGC agreement on the sharing of oil resources was revised in
August 2000. Under terms of the revision, Dakar is granted an 80 % interest and -Bissau will receive 20 %.

In February 2000, the Australian firm Fusion Oil & Gas was awarded one of four deepwater areas administered by
the AGC. Fusion entered into an exclusive Technical Cooperation Agreement (TCA) with the AGC in December 1997. The
TCA established a framework for a re-evaluation of the deepwater portion of the AGC area, in return for the
opportunity to acquire acreage.
The technical report has been completed and a license application is awaiting ratification by the AGC authorities. In
December 1997, Benton signed a memorandum of understanding with Petrosen for a 45 % interest and operation of the
onshore Thies block Benton also acquired from Petrosen the exclusive rights to evaluate and reprocess geophysical
data for Senegal's shallow near-offshore acreage, and to choose certain blocks for further data acquisition and
exploration drilling.

Benton's working interest in any offshore discovery will be 85 % with the remainder held by Petrosen. Vanco Energy,
the Texas-based oil venture, signed a production sharing agreement (PSA) with the government of Senegal in October
1999. The PSA is for the Dakar Offshore Profond permit, a 7.9 mm acre (32,000 sq km), deepwater block that extends
from Senegal's offshore boundary with Gambia to the Mauritanian border. The license is the largest concession to date
in offshore Senegal, and the country's first deepwater award. Vanco is operator of the concession with a 90 %
interest and Petrosen holds the remaining 10 %.
Australia's Roc Oil signed a PSC with Senegal's Ministry of Energy and Mines in October 1999. The PSC gives Roc and
Petrosen exclusive rights to explore the Casamance Offshore Blocks I, II and III for an initial period of three
years, renewable for up to an additional four years.

The blocks, located offshore southern Senegal, cover a total area of 2 mm acres (8,187 sq km). Roc currently holds a
92.5 % interest (Petrosen 7.5 %) in the PSC but is currently in the process of assigning part of this interest to a
third party. In accordance with economic structural reforms mandated by the ESAF and to increase the interest in
hydrocarbon exploration in the country, Senegal issued a revised hydrocarbon law in 1998.
The new code revised terms of exploration permit, including the length that a permit can be held and the provisions
concerning extensions of permit licenses.

Guinea Bissau
Already involved with Senegal in some exploration, Guinea-Bissau, a newcomer in the West African oil boom, has
launched a licensing round at the end of 2001, following encouraging marine seismic surveys supported by the World
Bank conducted during the 1980's. With its maritime border agreement with Senegal ratified in 1993, in December 1995
Bissau carried out joint oil exploration in the area estimated to have an offshore oil production potential of 7 mm
tpy, although this is still in the exploration phase. Bissau has a small upstream oil industry that has been hindered
in the past by civil unrest and border disputes with neighbouring Senegal.
There is good potential for the upstream oil industry in Guinea-Bissau. The area offshore can be considered
under-explored as only 10 wells have been drilled in this area during 40 years of exploration. The entire basin
contains known source potential with the central portion of the area being the most prospective. There has been
active exploration offshore Guinea-Bissau since the late 1960's when Esso drilled six wells.

Exploration has taken place since the early 1960s with a number of licensing rounds to promote the offshore acreage.
The British's Premier Oil has teamed up with Canada's Petrobank and the Guinea-Bissau's state-owned oil company
PetroGuin to drill an exploration well on the country's Block 2.
In 1974, Guinea-Bissau gained its independence from Portugal and since then exploration has been frequently affected
by civil unrest. Offshore exploration has been hampered by a boundary dispute with Senegal, which was not resolved
until 1993. There have been intermittent drives to promote the offshore and a number of international companies have
been involved in offshore exploration during the last 40 years. Amongst them are Esso, Elf, Pecten, Lasmo, Sipetrol
of Chile, West Oil, Fusion Oil and Gas, Benton Oil and Gas and Petrobank Energy and Resources.

With the election of President Koumba Yala in February 2000, there has been another focus on the upstream oil
industry. A licensing round is planned for the fourth quarter of 2000. PetroGuin, in association with First Exchange
Corporation, is offering six of the existing seven offshore blocks to international bidders. Petrobank Energy and
Resources currently hold the rights to the seventh block, Block 2 or Sinapa.
On June 29, 2001 Petrobank announced that it has partnered with Premier Oil to drill an exploration well on
Petrobank's Block 2 offshore Guinea-Bissau. Through funding 100 % of the cost of the exploration well, Premier will
earn a 55 % interest in the Block, Petrobank will retain a 15 % interest with the remaining 30 % held by PetroGuin.

Premier will assume operatorship of the Block and drilled the well during the second quarter of 2002. The partners
had earlier formally signed an agreement to begin work on offshore Blocks 4A and 5A immediately south of and adjacent
to Block 2. The initial work commitment for the new blocks entails seismic reprocessing.
The blocks contain several salt piercement structures similar to the main exploration target on Block 2. Combined,
the three blocks comprise over 1.4 mm acres and lie approximately 80 miles offshore in water depths of 30 feet to
over 3,000 feet. Ownership of the new blocks reflects the new Block 2 ownership interests.

Gambia
Gambia has an infant upstream oil industry and exploration for hydrocarbons is taking place offshore Banjul. In 1998,
West Oil held an offshore block under a Technical Cooperation Agreement (TCA) and Planet Energy held the rights to
two blocks, Block A offshore and Block B onshore. In October 1999, Fusion Oil and Gas NL, with 90 % and Gambia 10 %,
signed a Petroleum Production Licence (PPL) for the deepwater offshore block off Banjul, previously held by West
Oil.
Fusion carried out an in-depth study of the data available for the deepwater areas offshore Gambia. The license
covers an area of approximately 5,000 km. West Oil collected much of this data under their TCA agreement with Gambian
government. In December 1999, 1,000 km 2-D seismic survey was shot over the block. Processing of the lines was
completed in London. UK in February 2000.

The license has been issued for six years during which time Fusion will undertake an extensive exploration campaign
involving seismic acquisition and the drilling of two wells. It is believed that offshore Gambia has good
prospectivity for hydrocarbons. The area marks the northern extent of the Casamance-Bissau sub-basin, which forms
part of the Mauritania-Senegal-Gambia-Guinea-Bissau coastal basin.
It is characterized by prominent halokinetic deformation and there are proven petroleum systems in the area (the Dome
Flore Field in the nearby Senegal/Guinea Bissau Common Zone has approximately 900 mm barrels of shallow, biodegraded
oil-in-place). A satellite seep detection study has been commissioned from UK consultants, NPA Group, and reveals an
alignment of distinctive, repeatable, petroleum seepage anomalies in Gambian deepwater. This alignment corresponds to
a significant Tertiary fault and overlying present day seabed canyon, and therefore is taken to be indicative of
ongoing active petroleum generation.

Licensing rounds have recently been conducted covering acreage offshore Senegal adjacent to Gambia, and further south
in the Senegal/Guinea Bissau Common Zone. The results of these rounds have yet to be announced, but immediately to
the north of the Fusion permit, Vanco has recently signed a deepwater license in Senegal while to the south Roc Oil
has acquired a shallow water license in the Casamance area of Senegal.
To the north virtually the whole of offshore Mauritania is now licensed and there has been a recent spate of
licensing activity in Morocco. The upsurge in industry activity in Northwest Africa is as a result of deepwater
exploration success elsewhere in West Africa (10 bn barrels discovered since 1994) and the recognition on seismic
data of similar turbiditic reservoirs that have proven to be so successful in Angola, Nigeria, Congo and most
recently Rio Muni in Equatorial Guinea.

Deepwater plays have yet to be tested in Northwest Africa. The first deepwater wells in the region are anticipated in
Fusion's Mauritanian acreage, which although in a different sub-basin, will have a significant bearing on the
prospectivity of Gambia license.
Fusion managing director Alan Stein has said that "the company is particularly pleased to sign this license with the
Republic of Gambia since it marks the end of a two year period during which Fusion worked very closely with Gambian
Department of Trade, Industry and Employment to evaluate all the historical data acquired by previous exploration
companies. The results of these studies have revealed significant, previously unrecognised deepwater exploration
potential and have enabled Fusion to embark upon a fast-track exploration programme which will commence within weeks
of signing the license."

Lamin Kaba Jawara, Gambia's Commissioner for Petroleum, added that, "As a result of the TCA Gambia has been
sufficiently encouraged to enter into an agreement with Veritas regarding the acquisition of a new speculative survey
over vacant acreage to coincide with the survey planned by Fusion later in the year. The Department of State for
Trade Industry and Employment looks forward with confidence to continuing our work with Fusion to fully evaluate the
prospectivity of our deepwater acreage."
Banjul recently signed a PPL with Britain's Planet Oil in conjunction with Balmain Resources over offshore acreage.
While Planet Oil is the operator, Balmain Resources has a 10 % interest in the acreage that has four potentially
viable prospects with probable oil reserves exceeding 100 mm barrels. The largest prospect, G-8, is estimated to have
oil in place reserves of up to 1.4 bn barrels.

Gambia lies entirely within the geological boundaries of the Senegal Basin, which is the largest of the West African
passive continental margin basins. The most recently completed comprehensive evaluation of the area incorporated new
seismic, magnetic and gravity data acquired in 1990-91 together with reprocessed pre-existing seismic and geological
data.
Numerous structural and stratigraphic traps were identified in Mesozoic and Palaeozoic sequences which were
interpreted to have potential high quality reservoir rocks,effective seals, access to mature organic source beds and
a timely hydrocarbon migration history.